Taxes

The revelation of the leaked Luxembourg tax files and the related reporting of the extent of the tax avoidance industry in the UK should come as little surprise. Tax legislation, and its enforcement in the UK, has been based on a school of thought that encourages the unchecked forces of supply and demand to reign supreme. This, in turn, has infused business culture in Britain.

In Nigeria, as well as around the world, a majority of taxpayers view tax not as a contractual contribution to government expense, but as an involuntary tribute to be paid to avoid prosecution and penalty. Merely transcribing taxes from economic textbooks into local law will not work; tax regimes have to be developed from within the society, and targeted at the peculiar needs of the government. Tax policies have to be written by the people – and for the people. Only then would a sense of participation and expectation be truly generated, and the tax system manifestly effective.

Over the last two decades, European policy makers have imposed restrictive fiscal policies on member states. They have concentrated on the design of fiscal rules and the structure of budgetary processes but they have never thought of introducing a new tax system able to reduce unemployment and increase investments. Only one tax system could eliminate all the growth-related problems without generating side effects on domestic expenditure: a flat tax system.

The US does not need an experiment with a flat tax. A careful study of countries that have embraced a flat tax system demonstrated three main pre-conditions that required a flat tax; none of which the US has. Adopting a flat tax would only confirm what many suspect but hope is not true: that America is broke, desperate for inward investment, incompetently governed, and increasingly ruled by a self-regarding oligarchic elite.